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This liability can make zero-coupon bonds less tax-efficient for some investors. Commitment: Zero-coupon bonds are intended to be a long-term commitment, usually spanning 10 to 30 years.
Investors purchase these bonds, effectively lending money to the issuing company. In return, the company promises to pay periodic interest payments, typically semi-annually, and return the ...
Lower minimum investment: A typical bond has a face value of $1,000, but with a bond ETF you can buy a collection of bonds for the price of one share – which may cost as little as $10 – or ...
The provision denies tax-free treatment to certain spin-offs where either the distributing corporation or the controlled corporation is a "disqualified investment corporation", defined as having investment assets that are two-thirds or more (75 percent or more under a first-year transition rule) or the value of the corporation's total assets.
In fact, many investors who love stocks couldn't tell you the difference between a company bond, a bail bond and those U.S. Savings Bonds Aunt Winnie used to dole out with boxes of marzipan candy.
If, instead the firm finances with debt, then, assuming the firm owes $100 of interest to investors, its profits are now 0. Investors now pay taxes on their interest income, say $30. This implies for $100 of profits before taxes, investors got $70. [1] This tax-related encouragement of debt financing has not gone uncriticized. [2]
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